CannaVEST Corp (OTCMKTS:CANV) Crashes Hard After Annual Report
After failing to complete its annual report prior to the March 30 deadline CannaVEST Corp (OTCMKTS:CANV) were at least able to do so within the 15-day “grace” period. The report was submitted after the end of last Thursday’s session and judging by the reaction displayed by investors on Friday quite a lot of people were left quite disappointed.
Indeed, the filing of the report not only put an end to the recent uptrend of the ticker, in just five sessions CANV were able to climb from 35 cents to over 60 cents, but it also slashed a significant portion of stock’s gains. When the closing bell put an end to Friday’s session the stock of the company was sitting at $0.445, just a nudge above the low of the day of $0.44, for a loss of more than 28%. The number of traded shares reached 2.07 million, which more than doubled the monthly average. Was the severe drop-off just an overreaction, though?
In order to answer the question let’s see CANV‘s results for 2015. As of December 31, 2015, the company had:
• $518 thousand cash
• $16.6 million total current assets
• $2.45 million total current liabilities
• $11.53 million net sales
• $12.23 million net loss
For a pennystock CANV‘s balance sheet contains some rather impressive numbers but compared to the results for 2014 a lot of the financial indicators show signs of deterioration. The cash reserves are down by nearly five times while the current liabilities have increased by close to four times. Even the fact that the annual revenues are up by $1.3 million to the staggering amount of over $11 million gets quickly overshadowed by the net loss for the year that has surpassed $12 million – compared to a net loss of just $1.31 million for 2014. It should be noted, however, that the increase of the net loss was partly caused by a significant non-cash expense of $6 million as stock-based compensation and over $2.6 million recorded as bad debt.
Last year CANV had to raise additional funds through a securities purchase agreement during which it issued several convertible notes. The threat of dilution and the issuance of underpriced shares through conversions was yet another negative influence on the stock. According to the annual report in 2015 5.7 million shares were issued as a conversion of the notes at an average price of $0.136 per share with another $880 thousand in convertible debt still outstanding as of December 31. Earlier this year, however, CANV sold a $850 thousand non-convertible promissory note and used the proceeds to prepay what was left of its convertible debt. Some more shares were still issued at a significant discount though – 3 million shares priced at $0.083 each and 2.5 million shares at an even lower price of $0.0612.
The company has made some steps to boost investor confidence and if it avoids taking on any new convertible debt while cutting on some of the expenses its stock could move to higher price levels. Don’t underestimate the risks, though, and before committing to any trades you should take the time do your own due diligence.
